Sign on the dotted com? The Impact of Technology on Contract Law in Corporate America

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Posted by admin on Feb 23, 2016 in David DelCollo, Uncategorized | Comments Off on Sign on the dotted com? The Impact of Technology on Contract Law in Corporate America

David DelCollo Attorney

By David DelCollo, Attorney

It is difficult to imagine that the great legal minds of the past could have ever envisioned the practice of law that we currently know. From ancient Greek and Roman times until the days of the old English courts, some of the greatest innovations in the application of contract law was the act of actually writing down one’s intentions, as opposed to a mere verbal “meeting of the minds.” Today, however, contracts are drafted, reviewed, and signed without a piece of paper or a drop of ink and all of this happens at lightning speed as fast as your internet service can provide.

While today’s high-tech tools can help businesses run more efficiently, these same tools can also put a company at great risk of winding up in court. Is an agreement between two parties through the use of email an enforceable contract? Does one’s electronic signature provide the same commitment and obligation as that of a paper signature?

As in most legal issues, there is no precise answer to these questions, however, a thorough understanding of the law in this area is a good business practices that can assure a company does not end up in expensive, drawn-out litigation.

Most companies today conduct a substantial, if not all of, their business through the use of computers and email. While employees often times are sending and receiving emails without regard, it is important that they always remember to consult their in-house counsel or an attorney before they engage in any language that could be potentially binding.

The use of technology has not altered the fundamental elements of contract formation, in that there must be an offer, acceptance, and mutuality of consideration. Where business is conducted through the use of emails, instant messaging, and websites, however, contract law has been forced to adapt to these new mediums. Courts have found, with some exceptions, that emails, instant messaging, websites, and other forms of electronic media can ultimately be deemed a legal, enforceable contract.

One area of considerable litigation that often proves to be problematic is in the use of electronic signatures. An electronic signature, or an e-signature, is an electronic means in which a person adopts or agrees with the content of any electronic message. The most common form of an e-signature is found on an electronic document in the form of a “check box” with accompanying language of consent. However, Courts have found that where the other elements of a contract are present, an e-signature can be as simple as one merely typing their name at the end of a document.

In the case of CSX Transportation Inc. v. Recovery Express Inc., a seller argued that a corporation’s domain name in an email address constituted a valid electronic signature. In another highly cited case, Brantley v. Wilson, a purchaser of real estate argued that the seller’s name and title within the email fulfilled the signature requirement.

In determining the existence of an e-signature, Courts frequently consider whether there was the requisite intent that the party intentionally and deliberately typed or caused their name to be affixed to the electronic document at issue. This has lead the Courts to often determine that where a person actually types their name, as opposed to their name being generated by an automatic process, the signature requirement of the contract is fulfilled.

Codified law has attempted to address and reform some of the problematic issues dealing with valid contracts and technology. In the Federal Electronic Signatures in Global and National Commerce Act (ESIGN) and in the State Uniform Electronic Transactions Act (UETA). ESIGN, which applies to transactions in foreign and interstate commerce, establishes a fundamental principle that, subject to any of the listed exemptions, electronic signatures and electronic records cannot be denied legal effect solely because they are in electronic format, as opposed to being on paper. ESIGN provides a very broad definition of an electronic signature as being “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with intent to sign the record.” The UETA, which has been adopted by all of the states in some form, also provides that the signature requirement on a contract cannot be held invalid merely because it is in an electronic form. There is one primary difference between ESIGN and UETA, in that UETA requires that the parties agree in advance to conduct their business and perform their transaction through electronic means. Therefore, in order to seek protection for an electronic signature or record under UETA, the parties must demonstrate a prior agreement to proceed in such manner.

While the Courts have made a great deal of progress in this brave new world of law and technology, there is still a long road that lies ahead. It seems that technology is evolving every day in the form of new websites, new apps for our smartphones, new software, and new gadgets, all while our Courts are trying to make sense of it all. One thing is certain in our uncertain future, however, and that is both technology and our laws will be ever changing. As Thomas Jefferson once said, “Laws and institutions must go hand in hand with the progress of the human mind…we might as well require a man to wear still the coat which fitted him when a boy as civilized society to remain under the regimen of their barbarous ancestors.” I think we would all agree.